Detailed Rationale

Crisil Ratings has assigned its ‘Crisil A-/Stable’ rating to the long term bank facilities of TruAlt Bioenergy Limited (TBL).

 

The rating factors in the revenues’ sustained scaling up in last few fiscals, supported by a phased increase in allocated quantities in line with the capacities. TBL has been able to sustain it operating margins at over 15% in last two fiscals supported by assured supply arrangements, and captive power from its group companies which partly lowers power costs. With strong operating performance, the debt protection metrics and capital structure have seen a correction in the past two fiscals, aiding the financial risk profile. Given the absence of major debt additions and healthy accretions, the financial risk profile would strengthen further over the medium term. Nevertheless, this would remain a key monitorable.

 

The rating reflects experienced management, assured supply arrangements, healthy demand for ethanol, and offtake agreements with OMCs, and above average debt protection metrics. These strengths are partially offset by susceptibility to fluctuations in raw material prices, exposure to regulatory risk in the distillery industry, and moderately leveraged capital structure.

Analytical Approach

Crisil Ratings has combined the business and financial profiles of TBL and its wholly owned subsidiary, Leafiniti Bioenergy Private Limited (LBPL).

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Experienced management, and assured supply arrangement, : TBL’s in-house raw material sourcing for ethanol production, particularly from its group company, strategically fosters vertical integration. This ensures a seamless supply chain, granting the promoter group company direct control over raw material quality. Leveraging the sister/group concern’s resources, enhances efficiency, reduces external dependency, and boosts overall operational stability, providing a distinct strategic advantage.

 

TBL stands as one of India’s largest biofuels producers, having strategically positioned itself as a prominent and diversified player in the biofuel industry, particularly in the ethanol sector, with an aggregate production capacity of 2000 Kilo Litres per Day (KLPD) (increased from 1400 KLPD) as of December 31, 2024. Out of the total capacity of 2000 KLPD, 1000 KLPD was converted to dual feed plant as on 30 April 2025, which can produce ethanol from cane (syrup, B-Heavy Molasses, C-Heavy Molasses), as well as grains (Rice and Maize).

 

TBL, through its subsidiary LBPL, is a producer of compressed biogas (CBG) under the Sustainable Alternative Towards Affordable Transportation (SATAT) scheme introduced by the Government of India in 2018 and currently operates at 10.2 Tonnes per Day (TPD).

 

Also, the promoters’ experience of over two decades in the industry has helped them in understanding the dynamics of the market and enabled them to establish relationships with suppliers and customers.

 

Healthy demand for ethanol, and offtake agreements with OMCs: The company’s product, fuel grade, will be used by oil marketing companies (OMCs) in Ethanol Blending Programme (EBP). Government of India ’s targets of achieving E20 petrol by 2025 through the National Policy of Biofuels 2018 has created huge opportunity for fuel grade ethanol manufacturers and there is a huge gap between the demand and supply. This coupled with offtake from OMCs (such as Bharat Petroleum Corporation Limited (rated Crisil AAA/Stable/Crisil A1+), Indian Oil Corporation Limited (rated Crisil AAA/Stable/Crisil A1+), Hindustan Petroleum Corporation Limited (rated Crisil AAA/Stable/Crisil A1+)) will continue to support the business risk profile over the medium term. Company has an offtake agreement from these OMCs to supply 52 crore litres of ethanol for the ESY 24-25 (Nov 24 – Oct 25), of which around 36 crore litre order is yet to be delivered and provides revenue visibility for FY26.

 

Above Average Debt Protection Metrics: As per Ethanol Blending Policy 2018 of GOI, company is eligible to receive interest subvention for 50% of the interest it pays on term loans. Interest coverage ratio adjusting for interest subvention was around 3.5 times estimated for fiscal 2025 and net cash accruals to adjusted debt was around 0.14 times estimated for fiscal 2025. Interest coverage is expected to be around 4-5 times going forward, despite higher debt levels.

 

Weaknesses:

Susceptibility to fluctuations in raw material prices: Profitability is exposed to fluctuations in raw material prices. Since the prices of cane, rice and maize depend on demand-supply factors, these are volatile and can adversely affect the operating margin. Though the government regularly intervenes to adjust the ethanol price paid by OMCs as per the input costs, sustainability of margin around 14-15% amid fluctuating maize and rice prices will remain a key monitorable over the medium term.

 

Exposure to regulatory risk in the distillery industry: The government of India advanced the 20% ethanol blending target (with gasoline) to 2026 from 2030. Further the recent lifting of restrictions announced by GOI on diversion of sugar for ethanol production from EY2025 is expected to aid the syrup availability for ethanol production. Since the ethanol industry is highly regulated, any change in the regulatory stance and continuation of government support to ethanol sector (particularly ethanol pricing) will remain key monitorable.

 

Company has completed modifying 50% of its total capacity (1000 KLPD out of the total capacity of 2000 KLPD) from mono-feed plant to dual-feed plant (further plans to convert additional 300 KLPD to dual-feed by July 2025). This modification enables the company to produce ethanol from grain-based feed, along with sugar-based feed. The modification to a dual-feed plant partially mitigates the regulatory risk that is present in the sugar/sugar cane industry. However, profitability is exposed to fluctuations in raw material prices, and timely revision of ethanol prices by GOI.

 

Moderately Levered Capital Structured: Large, debt-funded capital expenditure (capex) over the last 2-3 fiscals ending FY25 towards building ethanol manufacturing capacity of 2000 KLPD, and modification of existing capacities has resulted in external term debt of more than Rs 1100 crore. Company has a networth of over Rs.580 crores estimated as on March 31, 2025. Gearing was high at around 2.4 times while total outside liabilities to tangible networth (TOLTNW) ratio was around 3.7 times estimated for fiscal 2025. Significant improvement in these parametric with regular term loan repayment and steady increase in accretion to reserve will remain monitorable.

Liquidity: Adequate

Bank limit utilization is moderate at around 78 percent for the past twelve months ended March 2025. Cash accruals are expected to be around Rs.290-310 crores per annum, which would be sufficient against term debt obligation of Rs.140-180 crores over the medium term.

 

Current ratio stood at 1.04 times estimated as on March 31, 2025. The promoters are likely to extend support in the form of equity and unsecured loans to meet the working capital requirements and repayment obligations.

Outlook: Stable

Crisil Ratings believe TBL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors

• Significant improvement in revenue and sustenance of operating margin around 15%, leading to higher cash accruals
• Improvement in financial risk profile.

 

Downward factors

• Decline in revenue coupled with profitability margins falling below 11% leading to lower cash accruals.
• Large debt-funded capital expenditure or a substantial increase in its working capital requirements weakening the liquidity & financial profile.

About the Company

TBL is part of Karnataka-based, MRN Group. TBL is engaged in the manufacturing of distillery products such as Ethanol, ENA etc. The company has combined capacity of 1400 KLPD and increased to 2000 KLPD by December 2024.

 

TBL was incorporated in 2021 and had commenced its commercial operation from October 2022 after the Business Transfer Agreement with its group companies. 

 

TBL’s current capacity is carved out of the distillery units of Nirani Sugars Ltd with a capacity of 700 KLPD, Sri Sai Priya Sugars Ltd with capacity of 500 KLPD and MRN Cane Power India Ltd with capacity of 200 KLPD under Business Transfer Agreement and all the assets and liabilities with respect to distillery units are transferred.

 

LBPL was incorporated in 2020, is currently a wholly owned subsidiary of Trualt Bioenergy Limited (TBL).

 

LBPL is engaged in the production of renewable compressed biogas (CBG) and allied from sugarcane press mud, other agricultural residue etc. generated by its group entities. LBPL plant is located in Bagalkot, Karnataka and has total production capacity of 10 TPD (Tonnes per day).

 

Shri. Vijay Murugesh Nirani is Founder & Managing Director of TBL.

Key Financial Indicators

As on / for the period ended March 31		2024	2023
Operating income	Rs crore	1,229.66	762.38
Reported profit after tax	Rs crore	31.62	35.45
PAT margins	%	2.57	4.65
Adjusted Debt/Adjusted Net worth	Times	3.16	2.31
Interest coverage*	Times	1.97	2.75

*Adjusted for interest subvention

Any other information: Not Applicable